DUBLIN, March 7 (Reuters) - Ireland's largest listed companies are confident over half a decade of weak earnings, gloomy outlooks and shrinking dividends are behind them and that the economic upturn under way is sustainable and sensible.

In a busy week of earnings, an Irish bank turned a profit for the first time since the downturn, its main state-owned rival said it would soon be investor-ready and the largest builders' merchant said recovery had taken hold.

That came against an improving economic backdrop following Ireland's completion of a European Union/International Monetary Fund bailout, with unemployment falling below the euro zone average, consumer sentiment hitting a near seven-year high and mortgage arrears stabilising.

"We're probably more confident about the Irish economy than we have been in any time in the last six years, and the last six years have been very tough for us all, for Irish people and for Irish companies," Andrew Langford, chief executive of general insurer FBD, told Reuters.

"It is still difficult on the ground but there are a number of very encouraging signs. It looks like there might be a rise in consumer demand this year which follows six years where it has fallen by a total of 25 percent, an incredible figure."

While the Irish market is of less significance to major international players like builder's supplier CRH and airline Ryanair than ever before, FBD is one of the few Dublin-listed companies that are 100 percent geared to recovery at home.

The insurer, which this week upped its dividend by 16 percent, said the level of cover being demanded was finally on the rise following a contraction of 15 percent, as business customers stopped laying off staff and policy holders upgraded their cars or renovated their houses.

The number of new cars licensed jumped by almost 50 percent in January while the property market has begun to rebound with prices in Dublin up 14 percent on a year ago.

Signs of life in the property market, the root of Ireland's crisis, are also being felt by building merchant Grafton , whose profits rose 27 percent last year.

Among the most bullish about Ireland's prospects, Grafton - which has cut its workforce by a quarter - said there were few risks to the 7 percent rise in Irish building merchanting slowing as builders' order books fill up and the government renews its focus on the construction sector.

"I think the risks are relatively low but I do think it will be quite a gradual, shallow recovery rather than necessarily a significant spike upwards," its chief executive and industry veteran Gavin Slark told Reuters.

"There's always risks in any economic cycle but the really positive thing about Ireland is if you look at the depth of the downturn, there's an awful lot of pragmatism now in terms of people making sure the recovery is sensible and sustainable."

FRAGILE GROWTH STORY

The main concern shared by the country's top executives is that an external shock or slowdown in growth abroad could stop Ireland's open-economy achieving the 2 percent growth needed to start reducing one of the highest debt levels in Europe.

An event outside Ireland is the biggest risk, according to Bank of Ireland CEO Richie Boucher, whose bank returned to profit in the first two months of this year. This week, two investors who kept it out of state hands in 2011 tripled their money when they sold part of their stake.

Recovery stories like Bank of Ireland's have helped the local bourse rise by 14 percent this year to almost three-times its 2009 level, although it is still at just a third of the value hit during the heady times of the 'Celtic Tiger' economy.

For Allied Irish Banks, which said on Wednesday that it hoped to begin reducing the state's 99 percent holding from next year, the risks are the same.

"The real exposure for us is European growth and not the Irish domestic, I think we've done a lot and it seems like the government is very disciplined and will execute the rest," Chief Executive David Duffy told Reuters.

"You're so geared towards the export universe, European growth and the UK market, you need growth in those to be able to step beyond the 2 percent mark on GDP."

The signs from abroad so far look good ahead of the release of Irish fourth quarter GDP data next week with euro zone private businesses enjoying their fastest growth rate in over 2-1/2 years last month.

But with an economy whose exports are worth more than the total size of the economy, the Irish growth story needs that narrative further afield to continue.

"At the moment it looks like Europe's larger economies are emerging from recession but any shock won't be good for what still is a fragile economic growth story," said FBD's Langford.